Mitt Romney's Medicare plan raises cost questions

WASHINGTON — Mitt Romney's Medicare plan won't try to control costs by limiting the payments that future retirees would use to buy private health insurance, aides say. Budget experts are questioning how the Republican candidate will be able to get savings without caps.

Reining in costs is vital to keeping Medicare affordable, and in their plans both President Barack Obama and Romney's running mate, Paul Ryan, set limits on the growth of future spending. Romney's approach is different.

Romney campaign officials say Medicare savings will come through competition among health insurance plans. But independent experts say they doubt that Romney's plan can succeed without some kind of hard spending-limit.

"It sounds like Romney is trying to have it both ways," said Robert Bixby, executive director of the Concord Coalition, a nonpartisan group advocating to reduce government deficits. "It's a really important point whether there will be a cap. It will help determine whether the health care savings he's touting are credible."

For example, a President Romney would not be able to get credit for assumed savings through competition under the procedures currently used to analyze legislation by the all-important Congressional Budget Office. The nonpartisan budget referees might rule such a plan out of bounds, forcing Romney to accept a cap.

Bixby was a member of a Bipartisan Policy Center group that last year produced a deficit reduction plan that, like Romney's, called for shifting Medicare from an open-ended benefit to a program that gives future retirees a fixed amount of money for health insurance. It included a cap on the growth of spending.

"Competition alone is very speculative," Bixby said. Competition hasn't solved the health care cost problem for employers, who increasingly have been shifting costs to workers and their families in the form of higher premiums and copays.

Medicare covers nearly 50 million retirees and disabled people. Since its creation in 1965, it has been an open-ended benefit program, with taxpayers basically paying all the bills that come in.

Obama's health care law begins to change that, creating a board with the power to force payment cuts on the health care industry if Medicare costs rise above certain limits.

Ryan's budget, passed by the House this year, also would limit the growth of total Medicare spending, using a formula that links to economic growth.

Romney has charged that Obama's approach would eventually lead to rationing.

Obama has "an unelected board ... to decide what kind of treatment you ought to have," Romney said during Wednesday night's presidential debate in Denver. The board is prohibited by law from rationing care.

Romney calls his own plan "premium support." Critics say it would amount to a cost shift.

Aides to the GOP candidate say the plan would rely on competition — without caps or a cost-cutting board — to control spending and avoid cost shifts to seniors.

Retirees entering the program in 2022 and later would have the choice of private insurance or a government plan modeled on traditional Medicare.

The private plans would bid to provide health care to seniors in a given part of the country. The government's payment would be pegged to the second-lowest bid, or the cost of the government plan, whichever was lower.

Seniors who chose a higher-cost plan would pay the difference. Those who picked lower-cost coverage could keep the difference for medical expenses. Low-income retirees and people in poor health would get a more generous government payment.

The Romney campaign refused repeated requests for an on-the-record explanation of the strategy for limiting Medicare costs.

Instead, spokeswoman Andrea Saul issued a statement extolling what she called "a plan that empowers patients and families with more choices and robust competition, reforms insurance markets with strong consumer protections and proposes real entitlement reform that protects and strengthens Medicare for today's seniors and future generations."

In an earlier blog post rebutting Democratic critics of Romney's Medicare proposal, his campaign policy director Lanhee Chen made an indirect reference to the candidate's belief that costs can be controlled without spending limits. "Gov. Romney has proposed no cap on premium support in his own plan," Chen wrote, providing no additional detail.

Not having some kind of limit sends the wrong signal to the health care industry, said economist Joe Antos of the business-oriented American Enterprise Institute.

"I think that some bitter medicine is going to have to be administered here," said Antos. "For this policy to work, at least initially, you have to make it clear to the health care sector that there are financial limits to what Medicare is going to pay for."

Former U.S. Comptroller General David Walker, a leading deficit-reduction advocate, said it's hard to understand how the Romney plan would work because so much of it remains fuzzy.

"I just don't know that we have enough details to meaningfully evaluate it at this point," Walker said. "People are trying to evaluate what the cost would be, but they just don't have enough facts to effectively evaluate it."